HTC may buy Nokia's chennai plant

Nokia said on Monday that it expects the EUR 5.44 billion deal with Microsoft for sale of its Devices & Services to conclude on April 25 and expressed the hope it would continue to operate the disputed Chennai plant under a service agreement.

“Nokia today announced that it expects the transaction whereby the company will sell substantially all of its Devices & Services business to Microsoft to close on April 25, 2014. The transaction is now subject only to certain customary closing conditions,” Nokia said in a statement.

 The future of Chennai plant, which employs 6,600 people and is entangled in tax disputes with Indian authorities, is uncertain. “With Chennai, it is worth remembering that we have said we will consider a services agreement with Microsoft should our Indian assets not be able to transfer at the close of the global deal,” a Nokia spokesperson said.

A Nokia official told PTI the company is still exploring the option of operating the plant by getting into a services agreement, which would allow it to continue as a contract manufacturer for other companies. “The situation is a complicated one, and Nokia is continuing to weigh its options. As there is still time before the closing of the deal, we cannot speculate on possible outcomes at this point,” the spokesperson added.

In March, the Tamil Nadu government had slammed a Rs. 2,400 crore notice on Nokia, saying the company had been selling products from Chennai plant in domestic market instead of shipping overseas.

In what could be an interesting turn of events Taiwanese handset maker HTC’s CFO Chia-Lin Chang told the Economic Times that the company could consider purchasing the Chennai plant in a bid to better serve its interests in the Indian market. This after the company launched new products in three price points in India yesterday.  “I am happy to look into it, because the overall preparation, exploration hinges upon if it will serve consumers better. If [the plant] will do that, then we would be happy to look further into it,” he told the paper, which also quoted a source as saying that the plant may be losing its importance for Microsoft, due to the ongoing case.

On March 14, the Supreme Court ordered Nokia India to give Rs. 3,500 crore as guarantee before it transfers the plant to Microsoft. Last September, Nokia had announced it would sell a substantial part of its devices and services (D&S) business, including assets in India, to Microsoft by March 2014. The handset and other asset components under the deal will be handed over to Microsoft’s Finnish entity Microsoft Mobile Oy.

The company has often indicated that the transfer of the Chennai plant may be adversely impacted if the tax dispute remains unresolved. According to Nokia India Employees Union Honorary President, A Soundararajan, the Chennai plant, which was producing about 1 million mobile handsets per day, witnessed a steep decline and production now stands at just 0.4 million handsets.